Pierina adds ounces for Barrick

Ongoing drilling at two South American projects has increased the gold reserves of Barrick Gold (ABX-T) to more than 50 million oz.

The gold giant recently announced that its gold inventory rose to 51 million oz. from 36.5 million oz. reported a year earlier, representing an increase of 40%. In addition, the company reported a gold resource of 25 million oz.

Barrick attributes the increases to development work at the Pascua mine in Chile and advanced-stage exploration drilling at the Pierina project in Peru.

At Pascua, the company proved up an additional 8.1 million oz. last year, bringing total reserves there to 10 million oz. In addition, a resource of 6.7 million oz. was identified.

Further increases are possible, as surface drilling indicates the mineralized zone remains open to the south, east and west. Preliminary drilling from an underground drift indicates the zone is open at depth.

At the Pierina project, which the senior company acquired in September 1996 through the takeover of former owner Arequipa Resources, reserves stand at 6.5 million oz. In an aggressive drill campaign near the end of 1996, the company sunk an additional 201 holes. That program also identified a resource of 760,000 oz., and confirmed that the zone remains open to the east and south.

That resource figure, according to Barrick, is not representative of the project’s true potential, since initial drilling concentrated on quantifying reserves rather than property-wide exploration.

The company expects to bring the Pierina mine into production in 1999 at the rate of 500,000 oz. gold per year. Costs are projected to remain below $100 per oz., owing to a substantial silver byproduct. Commercial production at Pascua is expected to begin in 2000 at a rate of 400,000 oz. per year.

Contributing to the overall increase in reserves were the Betze-Post and Meikle mines on Nevada’s Goldstrike property and the High Desert joint venture of Barrick and Newmount Gold (NGC-N), in the Carlin trend. Production at Betze-Post and Meikle topped 2 million oz. last year, whereas High Desert, in which Barrick owns a 40% interest, cranked out 1.2 million oz.

Total production for 1996 amounted to more than 3.1 million oz. from 11 mines, making Barrick the second-largest gold producer in the world. The company’s average cash operating cost in 1996 was US$193 per oz. The company’s production has been hedged at US$420 per oz. for 1997, thereby circumventing the recent drop in gold prices.

At the beginning of the year, 6.7 million oz. gold had been hedged, representing more than two years of production.

Barrick reported earnings of US$56 million (or 15 cents per share) on revenue of US$330 million for the fourth quarter of 1996, compared with US$78 million (22 cents per share) on US$377 million for the same period of 1995. For the year, the company earned US$218 million (60 cents per share) on US$1.3 billion, compared with US$292 million (82 cents per share) on US$1.3 billion in 1995.